Iceland is currently trying to push bidders through to the next round of the £1.3bn to £1.5bn auction.

Mr Walker, who has pre-emption rights on the final bid, is lining up Blackstone's debt arm, GSO, to help finance his offer for Iceland.

GSO, which last week signed an agreement to underwrite part of Sony's $2.2bn (£1.4bn) acquisition of EMI's publishing arm, is said to have committed more than £300m of capital to Iceland deal.

In a market where bank finance is so scarce, GSO's commitment is seen as "make or break" to ensure the success of any deal. The debt package has been arranged by ex-Goldman Sachs rainmaker Dan Yelland who is working alongside Rothschild on advising Mr Walker.

GSO, which is offering mezzanine financing, is only part of the debt deal. A large group of banks including Lloyds, Royal Bank of Scotland, Deutsche Bank, Goldman Sachs and Morgan Stanley have all agreed to work with Mr Walker on a deal to buy Iceland.

The stumbling block remains the amount of equity Mr Walker is able to raise. Even with a debt package of £900m, the management team still has to stump up to £600m of equity.

The frozen food chain is 67pc owned by failed Icelandic bank Landsbanki and 10pc by equally troubled peer Glitnir. Management hold the 23pc balance, with 4pc in the hands of Mr Walker and 7pc owned by Iceland director Andy Pritchard.

Even if all of Mr Walker's team roll their equity over they would still need further investment to match bids from Morrisons and Asda. Although Mr Walker is thought to have sounded out Canadian pension funds such as Alberta Investment Management Corporation over their support, no deal has been finalised.

Other bidders TPG, Blackstone and Bain are thought to be more reliant on Mr Walker and his team, which they view as integral to buying the company. Unlike the supermarkets, it is thought the private equity trio do not have an alternative management team in place.

Morrisons and Asda – which need to sell off 200 Iceland stores to pass competition hurdles – are keen to get store-by-store profit information. However, it is understood Mr Walker has refused to make this information available because of commercial sensitivities.

Iceland has been one of the best performing food retailers in recent months. Its annual results showed profits up 14.8pc at £155.5m.